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How the EU’s Failed “Energy Shuffle” Made Energy More Expensive – and Dirtier

by | published August 2nd, 2016

Sometimes, the energy sector moves so quickly, you forget what project you were on… or even where you are. The last several days have been like that.

Early yesterday afternoon, I returned from a very hastily called weekend meeting in Abu Dhabi, only to greet a European party arriving in the evening for a session at my place in South Florida.

Both meetings were centered on the immediate future of global energy investment. With what’s shaping up globally in energy, one can always catch up on sleep later…

It’s certainly the case that there has been more movement in the last eight weeks than over any equivalent two-month period I can remember (and that spans over four decades in the energy business).

We’re about to see major changes in how energy investment plays out over the next several years.

Now, over the weekend, the focus was on international directions in crude oil finance. But last evening, I put my “European mindset” hat back on.

That matters, because the emerging European perspective in energy is quite different… and a lot more expensive…

Europe is Turning Into an Energy Basket Case

In this case, attention is fixed on three things:

  • continuing unease generated by the unexpected UK departure from the EU (known as “Brexit”),
  • broader concerns over problems integrating continent-wide energy sourcing policies, and
  • how all of this impacts energy project infrastructure and finance.

It’s safe to say that at this juncture, most of this is up in the air.

First off, Germany is embarking on the next stage in its “green” agenda, and France has recommitted to being the world’s dominant nuclear economy.

Meanwhile, Italy is once again worried about negotiating adequate imports of natural gas from Russia (via pipeline) and Qatar/North Africa (as liquefied natural gas, or LNG, shipments), while Poland returns to its earlier plans of resurrecting coal production as the country’s shale gas remains elusive and prohibitively expensive.

All of which signals that there is positively no cohesive vision for what an energy policy for Europe should be.

True, there has been much time spent on plans addressing a balance of sourcing – one that places less reliance on imports from Russia while at the same time providing just enough incentive for the two dozen-plus members to want a piece of the pie.

And then there is the challenging agenda to address climate change and carbon emissions, with a corresponding set of multi-year goals…

It was expected that the breakthrough accorded by the UN Climate Deal, struck last December in Paris, would jump-start this initiative.

Reports have emerged from, and hundreds of thousands of man hours expended at, the EU headquarters in Brussels. Some of this had provided fodder for the “leave” side in the British Brexit vote.

Yet a simple fact had emerged well before the June UK shocker, which brings is to the second factor in Europe’s changing energy

Lofty Climate Goals Don’t Make for Good Policy

Aside from laying down largely pointless targets, there was no consensus in Paris on how to achieve the grand climate objectives agreed on there. It would require once again burying Europe under (yet another) mountain of government subsidies and debt.

In other words, financial hardship is coming home to roost.

Europeans are already facing some of the highest energy costs worldwide. This new environmental agenda will add to that without guaranteeing any additional supply of energy. In fact, these new directions are certain to raise the price even higher.

That’s because the increasing emphasis on renewables, especially solar and wind power, have a hidden and counterproductive price tag. Power, after all, must be provided regardless of demand, grid conditions… or weather.

Indeed, under European policy, solar and wind generation require backup energy provision.

But short of a game changing development in battery technology, electrical power cannot be stored in sufficient quantities.

Instead, it must be generated continuously – even when the sun doesn’t shine or the wind doesn’t blow.

The result is what you’d expect, but not what the people writing these climate targets want…

Germany is Getting Exactly What it Didn’t Want

As a result of this policy, less desirable (and always older, less efficient, and more expensive to operate) coal and even oil-fueled plants must be kept in operation to provide the necessary support.

While some of these plants could be replaced by natural gas, the lack of sufficient local supply results in European nations becoming more dependent on imports of natural gas.

Finally, Germany’s experiment with pushing renewables hard and fast has shown just how difficult it is to make a massive shift in energy dependency.

This German move to solar and wind has taken longer than expected, while the (much quicker) phasing out of Germany’s nuclear power plants has resulted in a shortfall of power.

That has produced the worst of all possible worlds. As the average German experiences spiking electricity bills and a rise in taxes to subsidize renewables, the combination of power needs and backup generation is producing something quite bizarre…

German and British Utility Bills are Both Set to Rise

To offset the shutdown of Germany’s nuclear power plants, the country is now importing more electricity than ever from across the border in France… electricity generated by the very detested nuclear power technology that Germany was trying to avoid.

As if that wasn’t enough, keeping the nation warm in the winter and cool in the summer has created an even greater embarrassment for the environmental movement: In addition to French nuclear power, Germany has also been forced to import record amounts of American-produced coal.

Now, the UK has not escaped this European energy mess simply by opting out of it.

The collapse in the exchange value of the British pound sterling (caused by the Brexit vote) has already resulted in record exports of natural gas from the UK to Europe, to be followed by hefty (and higher-priced) imports when the weather gets colder later this year (as you saw last week).

Oh, and both English and Scottish power generators have begun to cancel discounts for end-users. The end result is that British consumers are going to face some of the steepest rate hikes in recent memory.

That’s what the energy situation in Europe currently looks like, and what we’ll be discussing here in Florida over the next several days. I’ll fill you in on any developments as soon as I can…

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  1. Robert in Vancouver
    August 2nd, 2016 at 15:18 | #1

    While gov’ts practice the new religion called ‘Save The Planet’ at great expense to ordinary folks, opportunists like Al Gore and his business partners at Goldman Sachs are making billions by selling phony carbon credits and other global warming scams. The net result is a few insiders at the top are getting rich while everyone else is getting poorer, and the planet will be just fine no matter what gov’ts and Al Gore do.

  2. Malcolm Rawlingson
    August 6th, 2016 at 13:11 | #2

    I 100% agree with you Robert. The “save the Planet” mantra pumped out by Ms Merkel in Germany and Gore i8n the USA is the biggest farce on the planet bar none. While making bare faced lies about reducing carbon emissions Germany is pumping out MORE CO2 than ever before and building large dirty coal burning power plants (in EAST Germany I might add) to counteract the loss of power from nuclear and the built in intermittency of so called rene3wables.
    It is a massive heist.

  3. DONALD BLACK
    August 6th, 2016 at 16:01 | #3

    WHERE DOES IRELAND FIT INTO THE ENERGY I.E. NAT. GAS SUPPLY, COAL & NUCLEAR SOURCE, NEEDS OF THE EU?

  4. Bob Schubring
    August 6th, 2016 at 20:09 | #4

    The main flaw in the global climate puzzle, is that it’s been made too complex. That complexity got used to justify a great deal of central planning, which led to nothing being done.

    So let’s re-state the climate issue in the simplest possible terms.

    1. For some unproven reason, sea levels are rising.
    2. If that trend continues, large tracts of land will submerge.
    3. There is no consensus on how the sea level connects to human energy production, but there are many theories that contradict each other.
    4. There IS consensus, on where the water must come from, to cause the observed changes in sea level.
    5. We should attempt a simpler solution, based on (4), if one is possible.

    Starting from that premise, the planetary water supply exists in oceans and on land. If the level of the ocean is rising by a few millimeters, then the level of water on land, must be going down.

    Where is there water on land, that could be going down?

    Two places.

    Greenland.

    And Antarctica.

    The Antarctic and Greenland land masses are covered with ice, nearly two miles thick. Volcanic activity exists nearby.

    Could a future volcanic eruption, cause a sudden rise in the world’s oceans, if it broke a big piece of ice off of Greenland or Antarctica, and the ice fell two miles into the ocean to make the biggest iceberg humans have ever seen?

    Absolutely this is possible.

    It may be happening slowly, as we watch.

    Does human energy production and carbon use, affect volcanoes? Not in the slightest.

    This means that we could spend the entire GDP of Planet Earth, crafting tricks to reduce our carbon output…and the volcanic disaster that raises sea levels and inundates coastlines, would happen anyway.

    What’s needed, is a better way to control sea levels.

    One method that should be explored, is to construct a set of pumping stations around the seacoast of Antarctica, to operate through the South Polar winter from March through September, and raise desalinated sea water two miles to the top of the Antarctic glacier. During the winter, the top of the glacier becomes very cold. Heat radiates off into outer space, dropping the temperature to -100 degrees F. If we allow for the wildest assumptions implied by present climate-change models, Earth’s average temperature might rise by 5 to 10 degrees.

    A 10-degree rise, would warm up the Antarctic winter, from -100, all the way to -90.

    At ninety below zero, it will still be plenty cold for any water pumped atop the Antarctic glacier, to freeze solid.

    Stacking that ice atop Antarctica, stops the ocean from rising.

    It would also cost far less, than it will cost to stop all carbon emissions.

  5. Rob Gregory, Sr
    August 9th, 2016 at 12:02 | #5

    I would like to add a comment on what Bob was trying to get. Why not go “Hydro-fuel”? reduce the foot print on renewable energy and global warming,
    clean air emmissions. We have the technology but choose not to use it. Afraid the big oil company will put up a fight. bla, bla. Just do it.
    I have a few great ideas on electric cars but lack the funding to put it to the test. I have in past tried to get grants and funding with no luck. I currently looking in the private sector to find funding. If more funding was available for guys like me we might come up with a. better mouse trap.
    thanks Rob

  6. Tom Blasingame
    August 26th, 2016 at 22:19 | #6

    Same story here… Thirty years designing and developing steam-electric
    locomotives and rail mobile steam-electric generating units, but unable
    to get funding to build and test prototypes.

    Here’s how we would propose to solve the greenhouse gas and global warming problems:

    The problem is not the coal, it is the air used for combustion.
    It consists of 20% Oxygen and 79% Nitrogen, which will not burn and
    remains to form NOx. We start the fire with “normal air”, then
    switch over to “Synthetic Air(tm)”, which consists of 80% Oxygen
    and 17% hydrogen. Because we have four times the usual amount of
    Oxygen, we can reduce the amount to 25% and have the same Oxygen
    supply. This eliminates the NOx.

    We specify that the coal not have any sulfur content; that gets rid
    of the SOx.

    Using a 3-pass boiler, we take the combustion gases to the smokebox,
    and combine the CO2 with the “Synthetic Air(tm)” to create Syngas
    which we take back to the firebox and combust as a secondary fuel.

    The final pass takes the combustion gases back to the smokebox,
    and pass them through feedwater heaters (heat exchangers) to extract
    all of the “paid for” heat and cool the exhaust.

    Using this combustion system, we can meet all of the EPA Tier 4
    emissions regulations and the Kyoto Treaty protocols… and operate
    at 10% of the cost of Diesel fuel or LNG.

    From the above article, it appears we should be talking to the people
    in Germany.

  7. folti baffi penipu
    September 5th, 2016 at 05:14 | #7

    Can you tell us more about this? I’d like to find out
    some additional information.

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